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RAPPORT

Big Data & Privacy: unlocking value for consumers

CROs in a changing environment

The scale of the collection and sharing of data has increased signi cantly thanks to digital solutions making new data available in huge quantity. Technology allows both private companies and public authorities to make use of data on an unprecedented scale in order to pursue their activities. As a consequence, a new EU General Data Protection Regulation (GDPR) has been endorsed in June 2016 and companies will have to apply it from May 2018. The GDPR justly provides all personal data processors with a rulebook to harmonise data handling practices and gives more control of personal data back in the hands of European citizens.

Insurers are becoming digital players, although at a slower pace than companies from other sectors. Insurance data mining and analysis have found in Big Data a promising environment to enhance their capacity. Thanks to Big Data & Analytics, data from digital interaction and sensors allow better risk pro ling and customer insight during both the marketing and servicing phases. This data can unlock value for consumers and lead to personalized solutions. Insurers are increasingly able to offer customized services to suit customer needs, better personalise premiums, lower costs for low-risk policyholders and improve loss prevention. Consumers, on the other hand, can benefit from insurance products on previously excluded risks. For example, as discussed in a previous Chief

Risk Officer Forum paper, patients suffering from previously non-insurable behaviour-induced diseases could share data related to daily physical activity and nutrition to enjoy individualized care offers, or the holders of motor policies could digitally communicate the maintenance status of their cars and so receive price incentives. In such contexts, persistently safe or healthy behaviours could be encouraged and rewarded.

In this paper, two case studies on life insurance for diabetes patients and ood insurance for home owners respectively, show how previously excluded risks may be covered by insurance products developed using Big Data. These case studies highlight the challenges of data privacy and protection as it relates to the new provisions of GDPR, identifying a number of key points for further development and discussion. A narrow interpretation of the legitimate interest concept, for example, or an incomplete implementation of data portability may result in constraints limiting opportunities for insurers to use data and offer consumers innovative solutions.

Chief Risk Officers (CROs) can support the transition to the new GDPR while establishing and nurturing relationships with the relevant institutional as well as corporate stakeholders, such as Chief Compliance Of cers and Data Protection Of cers. On top of managing existing operational risks ampli ed by the GDPR, like the risk of de-anonymization or decryption of stolen data, CROs can promote the benefits of a considerate and responsible use of Big Data within a strong risk management culture, which in turn builds consumers trust through a clear understanding of how their data is used and protected.

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